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holding outstanding Brazilian loans were being asked to contribute
their pro rata share of the new money. However, a number of
foreign lenders were reluctant to contribute any new money
whatsoever. The BAC then informed the foreign lenders that, in its
negotiation of a phase II restructuring deal on the foreign
lenders' behalf, there would be "no free riders". Although each
foreign lender would still have to consent to the terms of any
restructuring deal the BAC negotiated on its behalf with the
Brazilians, the BAC's official position was that a phase II
restructuring would be "all or none". The BAC feared that if a
large number of foreign lenders refused to contribute any new
money, its (the BAC's) efforts to conclude a phase II restructuring
deal between Brazil and Brazil's foreign lenders might unravel and
fail. While the BAC could not be certain that all of the foreign
lenders would ultimately agree to participate, it hoped to obtain
as close to 100 percent participation as possible, as any shortfall
of new money resulting from some foreign lenders' nonparticipation
and refusal to contribute would have to be made up by the other
participating foreign lenders.
On October 6, 1983, 60 major international banks agreed on a
framework for the phase II restructuring. Under this framework,
Brazil would be provided $6.5 billion in new money.
On October 12, 1983, the BAC issued to the foreign lenders its
term sheet with respect to the proposed phase II restructuring.
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